Dubai [UAE], February 7: The Dubai Financial Services Authority (DFSA) has imposed a fine of US$504,000 (AED1,850,940) on Ark Capital Management (Dubai) Limited (ARK) for having inadequate market abuse systems and controls, and for failing to notify the DFSA of a proposed change in control.
"The integrity of financial markets relies on the vigilance of its participants. The regulated community has an obligation to ensure that it does not facilitate market abuse," said Alan Linning, Managing Director, Enforcement, of the DFSA.
He added, "The DFSA requires firms to have in place systems to detect potential instances of market abuse, and to immediately submit a Suspicious Transaction and Order Report, when they have reasonable grounds for suspecting market abuse."
The DFSA found that whilst ARK had systems in place to identify trading patterns consistent with market abuse typologies, it failed to give adequate consideration to alerts generated by those systems, and in some instances did not promptly review them.
As a result, the DFSA considers that ARK's market abuse systems and controls were ineffective. This resulted in at least ten instances of trading that were overlooked and not reported to the DFSA or not reported in a timely manner.
ARK was also found to have failed to notify the DFSA of a proposed change in control. Although the change in control ultimately did not take place, an agreement had been entered into that meant an investor acquired 9.5 percent of ARK's shares, with the option to increase that shareholding to 90 percent once certain conditions had been met.
ARK mistakenly considered that because the initial shareholding acquisition fell below the 10 percent threshold, which would have necessitated the DFSA's approval, it was not required to notify the DFSA about the proposed change of control.
Linning added that the relationship between the DFSA and the firms it regulates is built on transparency; as such, the DFSA expects to be informed of proposed changes to firms' Controllers. This includes notifying the DFSA of potential changes of ownership, which is specifically required under the rules.
"Structuring transactions to avoid the need for DFSA approval, such as staggering purchases into tranches that fall below percentage thresholds, does not absolve firms of their separate obligation to notify the DFSA of a potential change in Controllers. This is especially true when there are agreements in place setting out a path that may result in a firm's ownership changing," he explained.
Source: Emirates News Agency
